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Aditya Birla Group may acquire Colombian mine stake for $1 bn

* Company in talks with American thermal coal miner Drummond Co

Written by Baiju Kalesh | Mumbai | Published: June 14, 2012 12:37:15 am

The Aditya Birla Group is in talks with American thermal coal miner Drummond Company to purchase a significant stake in coal mines in Colombia owned by the privately held company. The Kumar Mangalam Birla-promoted group wants to strengthen its mining business and utilise the coal for its captive power plants to make aluminium in India,a person with direct knowledge of the development said.

“The group is looking to own rights of anywhere between 20 per cent and 40 per cent of the coal produced in these mines and this may need an investment of $1 billion,” the person said. “The ownership will also help the group hedge itself against price volatility in the global coal market.”

“We do not comment on market speculation,” Tuhin Mukherjee,managing director,Aditya Birla Natural Resources,said.

“Indian power producers need to purchase overseas coal mines as there is a shortage of coal,” said a former managing director of a power producing company.

The Aditya Birla Group’s flagship company and aluminium maker Hindalco has been seeking environmental clearance to begin mining coal from the Mahan coal block in Madhya Pradesh to feed its 750-MW captive power plant to make aluminium. The company is building a 3,59,000-tonne new aluminium smelter project at Mahan.

Hindalco was allotted the coal block in 2006,for which environmental clearance was given in December 2008. Development work was halted after the area was declared a no-go zone in January 2010.

Debu Bhattacharya,managing director,Hindalco,said the smelter would start operations with purchased coal if environmental clearance for the Mahan coal block was not received in time. It will still take the company at least 12 more months to begin coal production from the mine.

The group,which trades in iron ore though its privately owned Essel Mining & Industries,is also scouting for iron ore mines in Africa as part of its trading business. Essel Mining’s net profit in fiscal 2011 rose by 26 per cent to Rs 688.79 crore from Rs 543.72 crore in the previous fiscal.

FE

DIVERSIFICATION

* Group looks to own 20-40% of coal output

* Coal from the mines to be used as feed for captive power plant and also for trading

* Coal mine ownership to help as a hedge against price volatility in global coal market

* Company also scouting for iron ore mines in Africa

* Mining projects in India stuck for want of green clearance

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